BT Cuts Ties With Openreach

Published March 10th at 1:30pm

Today Ofcom’s demand for BT and Openreach to legally separate has been met. Openreach, which operates the UK’s broadband infrastructure will transfer 32,000 BT staff to the new company which is to be managed by the Openreach board, set up by BT last year. The business will have its own strategy separate from BT, and BT branding will no longer be seen on Openreach vans.

Rival telecom companies have complained for years that BT has held back the roll-out of broadband as they have been slow in opening the network to rival operators. Ofcom believes the separation will gradually increase competition and investment.

The UK Government set out a plan in 2016 to give every Briton access to internet at speeds of 10mbps by 2020. However a recent study has found that 1.4 million homes and offices are still trailing behind on slower internet speeds. This legal separation is good news for internet users around the country as connection speeds could be set to increase as ultrafast full-fibre broadband becomes more widely available.

BT’s move to abide by the regulator’s plan means that Ofcom will not need to resort to legislation to introduce the change. This radical change in the telecoms industry could introduce a more equal opportunity for nationwide operators and faster internet speeds to the masses. Will the Government meet its target by 2020? Only time will tell…

29/11/2016 - BT and Openreach Ordered To Split

The UK has had a somewhat strange looking landscape for the broadband market for some time now. We’ve got multiple providers vying for customers across the country in true free market style, but are in the quite bizarre situation of one of these providers holding a de-facto monopoly over the infrastructure used by all their competitors. This is the situation with BT and Openreach - but it’s all about to change as the telecoms regulator Ofcom have just put their foot down and ordered their “legal separation”.

Openreach is the engineering arm of BT that controls the broadband infrastructure for effectively the entire the country. In itself, this isn’t a problem but other ISP’s like Sky and Virgin rely on access to the network to provide their service to customers. As you would expect, such a setup strays very much onto the strict anti-monopoly regulations in the UK and BT’s competitors have pushed for a full break-up that see Openreach become fully independent.

This news won’t come as a bolt from the blue for many in the industry, talks have been ongoing between Ofcom and BT for over a year. “We are disappointed that BT has not yet come forward with proposals that meet our competition concerns,” Ofcom said. “Some progress has been made, but this has not been enough, and action is required now to deliver better outcomes for phone and broadband users”.

The regulator will now prepare a formal notification to the European commission to start the process of forcing a legal separation of Openreach but it has stopped short of forcing a full break-up and sale of the subsidiary and added it remains “open” to further proposals from BT for a voluntary separation of the division into a separate company with its own board.

BT may argue that they are taking steps towards this after appointing a former Ofcom board member in Mike McTighe. However, the regulator doesn’t see this as enough; “Our proposal requires Openreach to become a distinct company with its own board”, they said in a statement. “This would comprise a majority of non-executive directors, including the chair, who are not affiliated with BT. Openreach would be guaranteed greater independence to make decisions on strategic investments, with a duty to treat all of its customers equally.”

There’s an appetite for faster internet in this country. The UK is currently ranked at 17th in EMEA countries for internet speeds with an average of 13.9mbps - half that of the world leaders over in South Korea. Ofcom believes that a more independent Openreach will open the door for better, more equal investment that could provide this nationwide. If this move goes ahead it will be one of the most radical regulatory moves ever made in the telecoms industry. Let’s hope it pays off.